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MONEY

How to Use Kickstarter to Launch a Business

Have a little idea that needs a boost? If you have a robust social network, this crowdfunding site could be just the thing to help.

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Caroline Mak and Antonio Ramos of Brooklyn Soda Works

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Caroline Mak and her boyfriend Antonio Ramos loved the taste of ginger, but didn't like the sugary-sweet taste of ginger ales and ginger beers on the market. They weren't spicy enough, nor were they adequately tangy. On a whim the couple set out to brew their own potent carbonated beverage out of their Brooklyn kitchen. Along the way, they concocted an array of other soda flavors, including grapefruit, jalapeno and honey and cucumber, lime and sea salt.

Lacking bottles, kegs, and any sort of industrial kitchen, Mak and Ramos – by profession an artist and a research chemist – needed funding to create any sellable quantity of their inventive sodas. So, they asked their friends, family, and strangers to pledge to them $1,500 over 40 days. The dollar and time parameters are part of the setup at Kickstarter.com, itself a start-up founded in April 2009 by five friends with the idea that individuals would give a little – especially if they got something back – to fund a creative project. (For more, check out Inc.'s story about Kickstarter's original business model.)

Roughly 1,000 projects, from rock albums to documentary films to, well, soda-bottling ventures, have been funded on Kickstarter since its launch. Kickstarter has never been about long-term funding; it's supposed to facilitate the asking for and giving of support for single, one-off ideas, says Kickstarter co-founder Perry Chen. Usually, project-creators offer incentives for pledging. Say, give a writer $15, and get a book in the mail. Give $50 and get an autographed copy and a screen-printed poster.

"The thing about the projects is that they are finite. You are telling people if you support me with these funds, you are going to get this thing," Chen says. "People are not investing in your soda company going on to become a big thing."

That means there's no long-term return on investment for supporters. There's not even the ability to write off donations for tax purposes. That hasn't stopped close to 100,000 people from pledging to Kickstarter projects. (For more, check out Inc.'s 2008 story about Kickstarter's original business model.)

Though Kickstarter is not designed to launch entrepreneurs into sustained success, it has shown great potential to bring ideas to fruition, and give traction to projects that, if smartly executed, can grow into small companies. Just look at Brooklyn Soda Works, which now sells its product weekly at a Brooklyn market and is getting requests from restaurants and retailers to sell the artisanal beverages.

Dig Deeper: Self-employment Basics

Using Kickstarter to Jump-Start a Business: Hone Your Idea

Before rushing into the world of crowdfunding, or micro-finance, as Kickstarter has alternately been called, there are a few facts to consider.

1. There's a barrier to entry.

Although Kickstarter is potentially open to everyone, each project must be approved by the site before it is given the go-ahead to post photos, videos, and a plea for pledges. Highly inventive projects are usually shoe-ins; a business venture with apparently adequate existing funding is not. A plan to travel Asia while creating location-inspired couture or mailing hand-designed postcards back home to donors could be approved; just saying "I want to backpack Europe" might not.

2. You set your own goals.

Once a project is approved, the project creator sets up a goal amount of money and a time period, say $2,000 over 30 days. If that amount is not reached in the time period, the project gets no donations and donors do not contribute. If the amount is reached or exceeded, it gets the funding and goes ahead.

3. Your online social network might be your biggest asset.

One other helpful way to meet both of the above criteria is to have a vibrant, diverse, and enthusiastic social network already backing you online. Whether it's just lots of Facebook friends or followers of a website related to the proposed project, Kickstarter will take that into account, knowing that friends will likely kick in a few dollars here and there – and big numbers really add up to strong support. Chen says projects succeed more often when they are a creative idea backed by strong network with existing gravitas.

Artists and entrepreneurs who have used Kickstarter say that though the barrier to entry might seem prohibitive, the founding crew of the crowdfunding site is often willing to work with potential project-starters, offering tips or coaching through the process. When April Smith, a musician from Brooklyn, had a repertoire of songs that she felt went over well in front of live concert audiences, but lacked a record label to record them onto an album, she turned to Kickstarter.

"Basically, I really wanted to record – I had the songs ready and really wanted to be able to release the album soon, because I had been playing them live and they had been getting a really great response," she said. "Rather than wait for a record-label break, and deal with all the red tape that could be involved and hold back the album, we decided to see what happens when we try to do this by ourselves."

Smith and her band grossed $13,100 – $3,100 more than her $10,000 goal – from 224 backers.

She says her fans and social media following contributed greatly to the success, even when they didn't have money to pledge. "What was really great about the project on Kickstarter is that it wasn't just people donating money, it was people spreading the word by tweeting and posting on Facebook and telling friends – and they helped me reach the goal as much as people who donated," she says. "I wound up getting a lot of new fans and new supporters."

Dig Deeper: Six Questions to Ask Yourself Before Starting a Business


Using Kickstarter to Jump-Start a Business: Master Self-Promotion

Just as you wouldn't start a business without a website, you should treat your Kickstarter pursuit seriously and build it a home online. Kickstarter itself helps with that, by giving your project a landing page (for description, donations, photos and video), a blog/updates page for periodic postings. And, if you're lucky or have a particularly interesting or well-executed project introduction, they might just feature your idea on the Kickstarter.com homepage or suggested projects pages.

Jane Palmer, a textile designer from Chicago, decided this January to found Noon Design Studio, her natural-dye business. But before she did so, she needed to pay off a lease on a dye machine she'd been renting. She turned to Kickstarter, and was featured on the front-page of the site for almost the entire duration of her project, despite that hundreds of other projects were asking for contributions on the site at the time. Her secret?

"I would say that the video quality is probably one of the most important things," she says. "I felt so lucky, because there are lots of other projects buried. But it was really visible, and it was project-of-the-day once. But in truth, my video was really good, with professional lighting and music composed just for it. So that I think made the difference."

Even with all that exposure, Palmer says her pledges were split fairly evenly between people she knew and those who just stumbled upon her project, showing the power of enlisting help from friends, fans, and anyone else who might already be connected to you online.

One tip: Don't feel like too much of a beggar. Remember, the most successful projects tend to give back to supporters in a way that feels like it is worth their funding. Giving access to an exclusive product or service goes a long way.

"Offer as much as you can in return for their investment and keep them a part of it," Smith advises. "When people start a project on Kickstarter, they don't realize that its really fun and an awesome way to connect with your fans."

Smith says one way she kept her project on people's radar was by keeping her page active and vibrant. She credits sustaining supporters' interest with her success.

"I would say, you know, you should constantly be creating. Try to do video updates, and update your project backers as much as possible," she says.

Mak, who founded Brooklyn Soda Works, credits both clarity and great incentives for her Kickstarter success. "The simpler the message, the more people will get into it," she says. "Also, having good rewards and incentive levels really gets peoples attention, and it shows you are actually contributing your own time and are really starting a legitimate business."

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Using Kickstarter to Jump-Start a Business: Proceed Wisely

To take your endeavor seriously as it moves into the future, cross-promote your website and Kickstarter profile, and incorporate links or widgets to any and all social networking you have.

Once you've tapped your social networks, don't be shy about sending out news blasts or links to Kickstarter updates – so long as they have something to say. And make sure that while your viral marketing and online presence is strong, that you don't let the actual project you're seeking pledges for slide.

"I would say that your audience or social network, if you're lucky enough to have one, are going to be the ones to support your project with money and spreading the word in social networking, so you want to really be sure you're going to be able to deliver," Chen says.

While it's not necessary to have a business model at first, it's a good idea to have goals in mind, and be prepared for a period of growth. Palmer says her business plan developed organically as her project grew. Simultaneously, orders started coming in for her organically-died fabrics.

"The most unexpected part of Kickstarter to me is that it also acted as advertising for me. I've definitely gotten publicity and a few clients from that site," she said. It was only after Kickstarter that she put together a functional business model and extensive marketing materials, including color swatches and information about all the natural dyes she uses.

While Mak agrees that having a clear mission statement is necessary both before launching a Kickstarter project and after, she says the one secret to starting her business through Kickstarter funding is something that can't be forced: "You have to really love and believe in what you're doing, because that really does come across."

Dig Deeper: Running a Home-based Business

Last updated: May 19, 2010




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